Negotiating Our Economic Future

Trade, Technology and Diplomacy

Geoffrey Allen Pigman

• Publisher: Agenda Publishing
• Year: 2020
• ISBN:
  9781788213868
• Topic: Política y relaciones internacionales
• Subtopic: Comercio y aranceles

Tariffs and trade barriers are rising and major diplomatic institutions that have promoted liberal trade for decades have come under attack as impending trade wars threaten global trade and global value chains for manufacturing weaken. And at the root of this crisis, argues Geoff Pigman, is accelerating technological change.

This book traces the impact of today's major technological transformations on global trade and the diplomacy that makes trade possible. Not only is global trade changing, in terms of what is traded and how, but diplomacy in the digital age is changing as well. Arguing that we must think differently about trade and diplomacy, this book proposes pragmatic policy approaches for the diplomatic management of a challenging and potentially dangerous future.

1

CRISES IN TRADE AND DIPLOMACY

In 2016, two elections shocked the globe, challenging the foundations of the open trading, liberal global economy and the diplomatic comity that had enabled it to flourish since the end of the Second World War. On 23 June, voters in the United Kingdom cast ballots by a 52/48 percent margin in a referendum to withdraw from the European Union, after 43 years of membership in the largest, most successful economic and political integration project in human history. Five months later, the rabidly protectionist and openly anti-diplomatic presidential campaign of Donald Trump in the United States resulted in Trump’s accumulating enough votes in the 1789 Constitution’s Electoral College to secure the presidency (despite losing the popular vote by nearly 3 million votes). As events of the next three years in these two countries that were cornerstones of the diplomatic promotion of liberal trade worldwide in the nineteenth and twentieth centuries respectively would bear out, voters had taken a hatchet to a system of economic and diplomatic principles that had brought unprecedented economic fortune to their own forebears and to much of the world in the process.

But the votes of that annus horribilis 2016 were only the tip of the iceberg, or more precisely the tip of several interlocking icebergs, to use a soon-to-be-anachronistic metaphor. A succession of crises afflicted the global economy, and international relations and the practice of diplomacy more broadly, in the second decade of the twenty-first century with particularly negative consequences for international trade. The global economy’s recovery from the financial crisis of 2008 and the ‘Great Recession’ that followed was slower and more uneven than recoveries from other recent economic downturns. Emerging new technologies, extending from micro-targeting in advertising to robotics to machine learning and artificial intelligence (AI), have played a significant part in determining whose recovery has been strong and whose has been marginalized.

Taking a longer view, the evolution of both trade and diplomacy has always been driven by technological development: for trade, the invention of the wheel, the steam engine, the internet; for diplomacy, the telegraph, the telephone, email, and video conferencing. Capitalism itself initially arose in the fifteenth century as the advent of limited liability corporations heralded a new means of funding lengthy sea voyages from Europe to Asia for Europeans to trade with Asians for exotic goods such as spices, coffee, and tea. Over the past half-century, a particular set of technological transformations have changed not only how capitalism and the global economy work, but also the basic workings of democracy, the states system, domestic politics, and diplomacy. The development since the 1960s of computers with the capacity to transmit funds electronically across the globe, mobile telephony, and the internet are key parts of an ongoing revolution in information and communications technologies (ICTs) that has changed how people do business and govern themselves. The next wave of this transformation, automation, robotics, and artificial intelligence, are only just getting underway.

Historically trade and the diplomacy that both enables and is enabled by it have been engines of economic development and growth, prior to and particularly during the age of capitalism. Trade has also been associated historically with imperial conquest and exploitation, be it the ‘free trade imperialism’ of the British empire (all too often accompanied by ‘gunboat’ diplomacy) or the savagery of abducting and enslaving other humans to be transported across oceans and sold and bought as chattels. Trade or commerce itself – the exchanging of goods and services between people – long pre-dated the emergence of states and governments. Yet for most of human history, trade took place between neighbours or between villagers, not across significant distances (Polanyi 1957, pp. 45–55; Baldwin 2016, p. 4). What makes international trade different from commerce or trade in the broader sense is the existence of international borders. The origins of trade and diplomacy are intimately intertwined. Trade has always been and remains a major form of diplomacy in and of itself. When flows of goods, services, capital, and labour, and more latterly data, information, and knowledge, cross international borders, they play a key part in creating, maintaining, and managing ties between people, communities, and states. Traded goods and services themselves become a mode of diplomatic representation and communication (Pigman 2016, pp. 15–25). The growth of cross-border trade depends on diplomacy to lower trade barriers, even if historically that diplomacy has often been between states possessing very different levels of power.

By the second decade of the twenty-first century, it became clearer than ever before that technology and trade are forces that have brought great goods to human civilization, but also wrenching disruptions. These disruptions have manifested themselves as different types of crises that often fall to diplomacy to overcome, or at least to mitigate. Understanding the crises that have beset the global economy and politics is the beginning of a search for new types of solutions.

A world wide web of crises

Innovations in communications technologies have been driving change in political communication for a long time. The invention of the radio brought mass communication and the opportunity for leaders and revolutionaries to spread propaganda to large numbers of people rapidly between the two world wars. The advent of film and television accelerated this process. Hitler’s Nazi regime in Germany used film with skill to glorify the Nazi state, as filmmaker Leni Riefenstahl’s work documenting the Nuremberg rallies and the 1936 Berlin Olympiad attest. In 1969 NASA showed the first landing of humans on the Moon live on global television, even if elements of the video feed had to be ‘re-created’ on a soundstage given the limitations of early video camera technology. The landing of astronauts Neil Armstrong and Edwin ‘Buzz’ Aldrin cemented a major US victory in a Cold War race to reach the Moon before the Soviets did. This revolution in information and communications technologies accelerated in the 1970s and 1980s, becoming a major contributor to the collapse of the Soviet bloc and the breakup of the Soviet Union. Video cassettes furtively circulated throughout Eastern Europe broke the stranglehold that the Soviet and satellite communist parties had on the access of their publics to news and Western entertainment.

The fall of the Berlin Wall in 1989, shown live around the world on still fledgling cable television news networks, was emblematic of a global movement of democratization that stretched far beyond the bounds of the old Soviet empire. But it was the beginning of a more profound challenge to the rule of elites, be they Soviet nomenklatura or Western-educated political classes. Ordinary people from a wide range of classes and socio-economic backgrounds, with widely varying degrees of education, demanded to be heard. Their demands have produced a broad range of political outcomes: the dissolution of the Soviet Union in 1991; the emergence of Scandinavian-style democracies in the formerly Soviet-ruled Baltic states; the fall of the Mafia ‘state within a state’ in southern Italy; the 1994 transition from apartheid to majority rule in South Africa; the violent collapse of the former Yugoslavia in the 1990s; and the mostly failed ‘Arab Spring’ revolutions against entrenched dictatorships in the early 2010s. But one of the most important and far-reaching by-products of democratization across the globe is a new flowering of populism, in all its glory and all its brutality, fuelled by increasing usage of the internet and social media.

Populism is far from a new phenomenon. From the earliest political societies, popular movements have coalesced and expressed themselves, frequently organized along class or ethnic lines, sometimes driven by grievance, sometimes motivated by an overriding issue of the day. Since ancient times, leaders have tapped into public sentiments and fanned popular frustrations in bids for popular support for their political, military, and economic projects. The invention of the printing press accelerated people’s ability to transmit and learn information and to make up their own minds about their needs and wants. As communications technologies have advanced, the symbiotic relationship between strong leaders and popular movements has grown, from Napoleon Bonaparte to Lenin, from Mussolini and Hitler to Franklin Delano Roosevelt and Mao Zedong, from Juan Perón to Mobutu Sese Seko.

Nonetheless, there are important senses in which many of the key political and economic problems that have emerged across the globe in the second decade of the twenty-first century are linked by an upsurge of technology-driven populism across the globe. Once the Cold War had ended, the pace of globalization of the world’s economies accelerated with the integration of the economies of the former Soviet bloc and the rapid liberalization of China’s economy in the 1990s. But as a new phase of globalization took off, anti-globalization sentiments surged, initially led by developing countries as a critique of the ‘Washington Consensus’ suite of neoliberal international development policies: development assistance conditioned on developing country governments’ adoption of tight monetary policies, lower taxes, reduced government spending, and lowering barriers to trade and foreign investment. Opponents of the Washington Consensus rallied in December 1999 against the World Trade Organization’s attempt to launch a new round of multilateral trade liberalization in the famed ‘Battle of Seattle’ (Baldwin 2019, pp. 209–10). Yet by the aftermath of the global financial crisis of 2008, developing country critics of globalization were joined by workers in numerous industrial countries who saw well-paid manufacturing jobs disappearing rapidly. What was easy for industrial country workers to see and criticize was firms ‘offshoring’ manufacturing to developing economies with lower wage rates, particularly China. What was harder for them to see and understand was the extent to which firms used automated production and robots instead of human workers to scale up production after the 2008 recession.

The response of the publics in many industrial countries to the 2008 crisis and the global economy in its aftermath manifested itself in ultranationalist sentiments, the normalization of racism and ethnic chauvinism, resurgent trade protectionism, and raging xenophobia in the form of opposition to migration and fear of migrants. Vladimir Putin’s consolidation of power in Russia by capitalizing on these sentiments in the Russian public was in many ways a harbinger of what was to come elsewhere. Ironically, Putin’s populist pitch to Russian voters resonated because much of the Russian citizenry had not yet even had the opportunity to taste the fruits of globalization and economic development. The Arab Spring uprisings of the early 2010s, which tried without much success (so far except in Tunisia) to bring more democratic, liberal forms of government to the Arab Middle East and North Africa, failed most spectacularly in Syria. What began as a civil uprising against Syrian dictator Bashar al-Assad morphed into a broader regional conflict, by 2015 forcing millions of Syrians, most of whom well educated and highly skilled, to flee toward Europe in search of peace and jobs. As 2019 drew to a close, the Syrian conflict showed no signs of ending.

The Syrian migration, joining already increasing streams of economic migrants from Africa and from farther east in Asia, caused fear of and hostility toward immigrants to spike across Europe. Popular fears led to the election or re-election of populist and ultra-nationalist parties and would-be leaders in several European countries, ranging from strongman Viktor Orbán’s Fidesz party in Hungary to the Law and Justice Party in Poland, the Cinque Stelle–La Lega coalition in Italy, and the Leave campaign in the United Kingdom’s Brexit referendum on EU membership. Even in European states that did not see populist/ultranationalist parties victorious in the mid-2010s, strong showings by Marine Le Pen’s National Front in France and the Alternativ für Deutschland (AfD) in Germany were in keeping with the overall trend. The popular craving for a revival of the strong state with strong leader, what Hitler had called the Führerstat, repeated itself in numerous countries around the world, in some cases paving the way for a resurgence of authoritarian rule: the 2016 election of Rodrigo Duterte as president in the Philippines, the 2016 election of Donald Trump in the United States, the entrenching of the powers of Turkish president Recep Tayyip Erdoğan through a constitutional referendum in 2017 and the 2018 election of Jair Bolsonaro in Brazil.

Rise in global migration numbers over past thirty years, 1990–2019

Source: International Organization for Migration.

Infographic: Austin Barnes.

Yet popular fears of migrants beg the question of why more people than ever choose to migrate in an age when economic prospects have improved so much for so many (see the next section). Leaving one’s homeland is not generally a first-choice solution to a problem. As the case of Syria illustrates, war, persecution, and authoritarianism are themselves often reason enough to motivate flight. The exodus of hundreds of thousands of Rohingya people from Burma into refugee camps in Bangladesh in the face of the threat of ethnic cleansing by Burma’s military is another example. But even excluding these most dire of conditions, in a wide range of countries a persistent lack of jobs and prospects for economic advancement make emigration a more attractive option than remaining at home. In the poorest, least developed states in sub-Saharan Africa and Asia, bleak income prospects may be widespread across the population. In many other states, from poor countries with authoritarian governments to middle-income countries with economic structures ill prepared to compete in the current global economy, some segments of the population may be living well, whilst so many others cannot earn enough to get by.

Public perceptions that structural inequality of opportunities is built into the contemporary economic system are growing, from the poorest to the wealthiest countries. This spreading awareness of inequality is translating not only into populism and ultranationalism on the political side, but in economic terms into a new wave of skepticism about how capitalism functions and its long-term viability. The crumbling of the Soviet empire and manifest failure of its economic system led to a triumphalism of Neoliberals and adherents to the Washington Consensus, who proclaimed Fukuyama’s notion of ‘the end of history’ as capitalist gospel, a view perhaps inadvertently supported by the ‘dot.com’ internet-driven economic boom of the 1990s. The attacks of 9/11 2001 and the Global War on Terror that followed did not manage to dent their enthusiasm, as another wave of economic growth, this time fuelled by real estate speculation driven by low interest rates kept down for political reasons (to prevent al-Qa’eda from triggering a global recession), drove global markets to ever greater heights.

Yet a quarter century after the fall of the Berlin Wall and the abandonment of formally socialist economic systems in most of the world’s nations, in the wake of the collapse of mortgage-backed securities and several leading global financial institutions in 2008, we have witnessed a resurgence in the popularity of socialism in many countries, particularly (but not exclusively) amongst younger voters. Workers, particularly in manufacturing sectors, see their skilled jobs replaced by automation, forcing them into less well paid alternatives. Blaming ‘offshoring’ and open trade for this transformation of the workplace was a natural response, sentiments easy for populist politicians to exploit. Yet recently public awareness of the dominant part that technology is playing in the reshaping of work has grown. Thus far, working people in many countries still understand less well how technology is eliminating some jobs and changing others. But at the same time they are coming to realize that capital has consolidated, particularly in technology industries, through mergers and acquisitions. Financial rewards to investors in major technology firms and hot startups have also risen dramatically (Thiel 2014, chs. 4–5).

Beyond job losses, individuals have come to feel increasingly the adverse impacts of technology on their personal lives. This has been a harsh realization for many who embraced the digital revolution. As the internet expanded in the first decade of the twenty-first century, both in t...